Widespread Chronic Drug Shortages Demand Congressional Action
There is substantial disagreement in Congress about how to address historic shortages in the U.S. of drugs and biologic products. Many drugs in shortage are necessary for treating chronic and severe illnesses, yet there have not been enough of these pharmaceuticals for years. Unfortunately, most congressional proposals would offer only meager solutions.
A September 14 hearing convened by the House Energy and Commerce Committee’s Subcommittee on Health showcased competing visions for such reform legislation. Republicans sponsored bills generally focusing on increased net revenues for manufacturers and increasing the use of drug compounding, while Democrats sponsored bills that would grant the U.S. Food and Drug Administration (FDA) more authorities to collect information from manufacturers. In July, the Senate’s Committee on Health, Education, Labor and Pensions voted out of committee the Drug Shortage Prevention Act, a bill that would require manufacturers of over-the-counter and prescription drugs to notify FDA when they are unlikely to be able to meet demand and to provide information to FDA about their suppliers of active pharmaceutical ingredients and other materials.
No legislative proposal would require better accounting by FDA of its efforts to identify and alleviate shortages—although FDA now provides little data regarding such efforts. In addition, no bill would take steps to authorize or facilitate imports of finished pharmaceuticals from abroad to attenuate shortages in the U.S., even though FDA now encourages such imports as part of its response to shortages. Congress should remedy these oversights.
This brief discusses the lack of information that FDA, Congress, and the public have about the true nature of shortages and how that deficiency obscures knowledge of how shortages happen and with what drugs; it proposes measures that Congress could take to improve resilience of the U.S. supply of pharmaceuticals.
Drug Shortages Are Worse than They Appear
Shortages of pharmaceuticals are a serious and vexing public-health problem for the United States. Economists teach that shortages are generally self-correcting because excess demand typically drives up prices, boosting incentives for incumbent firms to increase production and for other firms to invest in new production. Yet shortages for drugs and other medical products are surprisingly common here and abroad, cover widely used and essential medications, and sometimes persist for years. Shortages in the U.S. affect scores of widely used older drugs, including injectable dextrose, sodium chloride and water, and other sterile injectable products. But shortages also affect some new drugs, such as semaglutide, the active ingredient in Ozempic, which is approved for diabetes treatment and is widely prescribed for weight loss.
The number of shortages of drugs and biologics in the U.S. appears to be at an all-time high. On September 29, FDA’s website listed 152 current, unresolved, or ongoing drug and biologic shortages, of which 145 involved products regulated by FDA’s Center for Drug Evaluation and Research (CDER), with the remaining seven regulated by FDA’s Center for Biologics Evaluation and Research (CBER). The total of 152 exceeds the all-time weekly highs of 140 in 2012 and 2013, reported by FDA in 2018. It exceeds the 138 drug products in shortage reported by the House of Representatives Energy and Commerce Committee on September 6, 2023, partly because FDA-listed shortages of drugs regulated by CDER increased by seven in less than a month. Finally, it exceeds by almost 22% the 125 shortages of FDA pharmaceuticals that I reported for February 16, 2022.
But even these figures on the record-breaking number of shortages do not fully convey the scope of the shortage problem. First, although its most recent Report to Congress, covering calendar year 2022, reported 86 ongoing CDER- and CBER-reported shortages as of December 31, 2022—up from 83 in calendar year 2021—this count of ongoing shortages represents only shortages at least 12 months old on December 31. It does not include all shortages recorded by FDA on that date.
Second, an unreported subset of these 86 shortages is several years old. Listed shortages that began in 2019 and continued through December 31, 2022, for example, include dexamethasone (used for multiple sclerosis, allergies, cerebral edema, inflammation, and shock), hydrocortisone suppositories, potassium acetate (used to remedy low potassium), and parathyroid injections (used to address low calcium). Multiyear shortages for medications to treat chronic illnesses are especially concerning because they suggest that patients and doctors face significant challenges finding safe and effective alternative treatments.
Multiple factors contribute to drug shortages:
- Government regulation of the entry of new competitors and drug manufacturing practices limits how higher prices might increase supply.
- Insurance companies and government agencies that pay for drugs and hospital chains and clinics that administer drugs (as well as patients who benefit from them) may all find it difficult to negotiate contracts for more reliable production methods and supply chains. The production methods are under the direct control of the manufacturer, but changes in manufacturing may trigger potentially costly prior review by FDA. Also, weak links early in the supply chain—such as manufacturing processes by makers of active pharmaceutical ingredients—may be difficult for manufacturers of finished pharmaceuticals to control or reorganize.
- Perhaps to avoid accusations of opportunistic price-gouging, drug manufacturers and distributors often allocate in-shortage drugs in proportion to historical demand. As a result, prices during shortages are less than with alternative approaches to managing scarcity, such as an auction, and incentives to increase production capacity are also lower.
- The costs and burdens of shortages fall mostly on hospitals, which have to look for replacement medicines and develop protocols regarding their use, and on hospital patients, who often do not know that shortages delay their elective procedures or force the use of second-best drugs. Hospitals and patients left in the dark about shortages have limited abilities to seek reform.
FDA does not identify shortages in a coherent way, hindering public understanding of shortages and efforts by FDA and others to prevent and alleviate them. The statute provides a very general definition: “a period of time when the demand or projected demand for the drug within the United States exceeds the supply of the drug,” which FDA refines only minimally. FDA states that a shortage occurs “when the total supply of all versions of a commercially available product cannot meet the current demand, and a registered alternative manufacturer will not meet the current and/or projected demands for the potentially medically necessary use(s) at the patient level.” It adds that it considers shortages to be resolved “when all the manufacturers are able to meet total national historical demand.” FDA thus suggests that it determines “potentially medically necessary use(s) at the patient level” based on historical usage. Of course, historical usage differs substantially from the concept of demand, which generally reflects value to buyers and may increase if, for example, consumers fear increased scarcity in the future.
If total supply falls short of demand, economists would say that there is excess demand, a concept inversely related to what pharmacists call the “fill rate”—the percentage of units ordered that are accepted as deliverable, given available supply and inventory. For example, a fill rate of 60% means that supply is 60% of demand and, equivalently, that excess demand is two-thirds of supply (2/3 = 40%/60%). FDA does not say whether it deems that a period of excess demand is a shortage if demand exceeds supply by 25%, 15%, 1.5%, or 0.15%. It does not explain whether it uses a statistical approach, interpreting shortages as instances where excess demand exceeds the long-term average by at least, say, two standard deviations. It does not say whether it counts only those shortages persisting longer than a minimum period, such as a week. And it does not generally report the excess demand (or fill rates) observed during shortages, or how these might vary among various drugs and biologics in shortage. Similar problems plague FDA’s reports of “potential shortages.” Without an explanation of how it counts shortages or potential shortages, a recent FDA claim that it prevented 222 shortages in 2022 lacks a credible basis.
How Congress Can Respond
The CARES Act, enacted in March 2020 in response to the Covid-19 pandemic, granted FDA new authorities to collect information on potential shortage situations from manufacturers. Congress intended to increase FDA’s ability to identify potential shortages and to prevent them from disrupting patient care. So one should expect that FDA’s use of its new authority during the U.S. recovery from the pandemic and the associated reduction in supply-chain disruptions should have coincided with fewer shortages. But that did not happen. Instead, as noted earlier, the number of ongoing, unresolved pharmaceutical shortages rose by roughly 22% in just over 18 months (February 2022 through September 2023).
Congress has never asked FDA for a candid and full accounting of the identification of and response to potential and actual drug shortages. The Senate has considered greater analysis of shortages but not analysis focused on FDA’s performance identifying and responding to shortages. The Drug Shortage Prevention Act that recently passed out of the Senate Health, Education, Labor and Pensions (HELP) Committee did not include provisions of S. 2364 (Mapping America’s Pharmaceuticals Act, MAPA), which would direct the secretaries of the Health and Human Services and Defense Departments to map the U.S. pharmaceutical supply chain and use data analytics to dentify supply-chain vulnerabilities and other national security threats.
Congress must require a full accounting of FDA’s identification of and response to drug shortages. Without it, there is no way to evaluate what effect FDA’s shortage prevention and mitigation efforts are having in reducing shortage-related harm. Unfortunately, there is currently little basis for believing that granting FDA more authority to collect data would lead to nontrivial reductions in such harm.
Congress should require an independent evaluation of FDA’s program of identifying and responding to shortages, including:
- An assessment of the timeliness of FDA’s listing and delisting of drugs and biologics in shortage, based on a comparison of the dates when shortages are listed or delisted by FDA with data on excess demand or fill rates;
- An assessment of the effectiveness of FDA’s response to short-term shortages (for example, those less than one year old) and persistent shortages (for example, those lasting at least 24 months);
- An assessment of the effectiveness of FDA’s response to especially severe shortages—for example, those in shortage drugs for which excess demand is unusually large (or fill rates unusually small), using a representative sample of shortages;
- An analysis of the effectiveness of select shortage-mitigation measures, such as importation of foreign drugs and additional compounding in reducing excess demand or increasing fill rates;
- An analysis of trends in numbers of drugs and biologics in shortage as a percentage of the total number of such products that are FDA-approved and marketed.
Import Drugs at High Risk of Shortage from Trusted Foreign Countries
But greater accountability for FDA’s program to identify and respond to shortages is not enough. Congress should also take steps to formalize and promote some of FDA’s shortage-response actions, particularly FDA’s efforts to encourage manufacturers of similar drugs approved and marketed abroad to export them to the United States.
In its most recent annual report on drug shortages, FDA reports that the agency “exercised temporary regulatory flexibility and discretion with regard to new sources of medically necessary drugs, including FDA-registered foreign sources,” if alternative approaches to solve shortages were insufficient. While FDA describes its use of FDA-registered foreign sources as “rare,” it also provides no data to support the rarity of such use of “flexibility and discretion.” In a May 2023 letter to members of the House of Representatives, an FDA official explains that the agency is using or seeking imports of unapproved foreign drugs to alleviate shortages in two of seven shortages (about 29%) that it reviewed, involving cisplatin (a chemotherapy drug) and methotrexate (used in chemotherapy and in autoimmune disease treatment).
Importation of unapproved drugs from FDA-registered foreign sources has no statutory basis, but greater and more timely imports of such products could provide needed resilience to U.S. markets for pharmaceuticals. Recent academic research shows that drug shortages are often unique to specific countries. For example, one 2022 peer-reviewed paper examined officially reported drug shortages in 23 European countries and the U.S. between January and September 2020. The researchers—Reko Ravela, Alan Lyles, and Marja Airaksinen—performed a quantitative analysis of shortages for Finland, Norway, Spain, Sweden, and the U.S., the only countries that kept public records of drug shortages sufficiently detailed to allow meaningful international comparisons. The authors excluded shortages driven by manufacturers’ announcements that they were discontinuing one or more products.
For these five countries, the researchers counted numbers of notifications of active ingredients for which at least one product was in shortage (regardless of dosage form or formulation and strength). They found that the U.S. had 99 notifications of shortages so defined, and 41% of these were unique—not found in the other four countries studied. These data suggest that for many shortages of FDA-approved prescription drugs in the U.S., countries that are already trusted trading partners with competent drug-regulatory agencies could help meet excess demand in the United States.
Congressional action to formalize drug importation to address shortages in the U.S. should be limited to older drugs available as generics. Manufacturers of innovative pharmaceuticals that do not face generic competition often charge prices that are lower abroad than in the U.S. because of government price controls abroad. Importing such products into the U.S. would help foreign price controls enter the U.S. via a back door, along with such controls’ adverse effects on research and development. Instead, by formalizing additional importation of only finished pharmaceuticals available as generics, the U.S. would sidestep questions about which regulator makes the best approval and labeling decisions for new drugs. In addition, older drugs that are sold as generics typically have well-known safety profiles—so any differences in labeling for the same product in different countries should be minor and relatively easy to straighten out. Research shows that brand names of pharmaceutical products sold in the U.S. and abroad can be confusingly similar or even identical in cases where the active pharmaceutical ingredients are different. Limiting importation to older drugs available and more readily known by their generic names would reduce the risks to patient safety associated with such confusing brand names.
If additional importation of foreign versions of U.S. drugs in shortage were focused on countries with trusted drug-regulatory agencies—those in the European Union or selected countries in OECD—there should be few concerns about safety for American consumers. After all, if a 30-year-old drug is available in Finland or Spain and deemed safe for residents of those countries to use, why prevent its import into the U.S. to address potential or existing shortages?
Allowing importation may also be seen as a means of risk diversification—a prudent step toward a resilient supply chain that could benefit Americans and our trading partners alike. Indeed, in their 2022 paper, Ravela and colleagues showed that, for the five countries they studied, nearly 54% of the 893 pharmaceutical ingredient categories for which there was notification of at least one product in shortage were unique to one country. Clearly, opportunities to use additional importation of finished older pharmaceutical products to make domestic markets more resilient are not unique to the United States; such importation may have value in other countries as well.
Congress should help resolve the ongoing drug shortage crisis by authorizing and enhancing the importation of generic pharmaceuticals from selected foreign countries. Such an importation program should contain several components, including:
- Identification of select countries with adequate drug volume and trusted regulators of pharmaceutical safety and efficacy;
- Identification of the set of generic drugs at high risk of shortage in the U.S., such as those producing generic sterile injectables made by four or fewer independent firms in the United States;
- Sharing by FDA and its counterparts in select foreign countries of electronic access to results of inspections of manufacturers of drugs at high risk of shortage;
- Reductions or rebates of user fees paid under the Generic Drug User Fee Act for foreign-approved drugs imported for the purpose of addressing shortages;
- Sharing of data on the reference product approved by FDA and the reference products to which foreign generic products were shown to be bioequivalent.
Some of these issues—for example, the identification of countries and generic drugs to be included—may be sufficiently complicated that Congress should first take only an initial step toward such a reform. It could require an authoritative technical report about how importing finished pharmaceutical products could help remedy U.S. shortages in a manner that protects and promotes public health, at reasonable cost to consumers and taxpayers.
This brief has already discussed how Democrats’ preference for bills that would grant FDA more authorities to collect information from manufacturers would be insufficient in addressing the ongoing drug shortages. Next, it must respond to the Republican proposals.
Formalizing importation of foreign pharmaceuticals to reduce shortages of generic drugs in the U.S. would complement Republican proposals to address drug shortages through rebates because Republican policies will likely have somewhat limited effectiveness. It is true that reductions in manufacturers’ rebates will improve incentives for additional manufacturing capacity, but such policies are unlikely to be well targeted at reducing new shortages. Rebates are not aimed at improvements in reliability of manufacturing practices or of supply chains per se. In addition, most older generic drugs (even sterile injectables) do not go into shortage. Thus, the reductions in rebates (or increases in net prices) may come with adverse implications for the federal budget at a time of high federal deficits and steeply increasing federal debt.
The other House Republican proposal—to promote additional compounding of drugs in shortage— offers a modest refinement on existing FDA policy. In a recent guidance, FDA acknowledges that the federal Food, Drug, and Cosmetics Act restricts compounded drugs that are essentially copies of commercially available drugs—but FDA does not consider a drug to be commercially available when it appears on FDA’s drug shortages list. FDA’s guidance also notes that during a drug shortage, “outsourcing facilities” may compound drugs identical or nearly identical to FDA-approved drugs on FDA’s shortage list. These limitations mean that measures to promote importation from other countries where approved versions of U.S. drugs in shortage are already marketed may be a necessary and appropriate enhancement to other anti-shortage proposals now under consideration.
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